When financial statements are prepared, an expense must be recognized and the receivable balance reduced to net realizable value. However, in the above adjusting entry, why was the accounts receivable account not directly decreased by $7,000 to the anticipated balance of $93,000? This approach is simpler as well as easier to understand. Why was the $7,000 added to an allowance account? In reporting receivables, why go to the trouble of setting up a separate allowance? Answer: When the company prepares this adjustment at the end of Year One, it does not yet know which accounts will fail to be collected. Officials are only guessing that $7,000 will prove worthless. Plus, on the date of the balance sheet, the company actually does hold $100,000 in accounts receivable. That figure cannot be reduced directly until the specific identity of the accounts to be written off has been determined. Utilizing a separate allowance allows the company to communicate the expected amount of cash while still maintaining a record of all balances in the accounts receivable T-account.
payday loans dallas fort worth
online loans for bad credit no credit check
payday loan delaware oh
houston payday loan and cash advance
payday loan fredericksburg virginia
fast gold loan
instant loan today
unsecured personal loans for bad credit
payday loan in maryland illegal
fast cash rochester ny
cash loan Havre
online payday loan kentucky
chicago fast cash buyers
payday loans walla walla washington
www cash advance
alabama payday loan fees
fast cash no job
payday loan colorado
payday loans quick
payday loans russell ks
payday loans orrville ohio
cash loans in tn
payday loans ohio legislation
pre approved loans
compare personal loan interest rates
payday loans hayden idaho
2500 loan
get money loan without employment
payday loan henderson nevada
payday loans halifax
payday loan longmont co
fast cash villa rica
Sales and the ultimate decision that specific accounts receivable will never be collected can happen months apart. During the interim, bad debts are estimated and recorded on the income statement as an expense and on the balance sheet through an allowance account, a contra asset. In that way, the receivable balance is shown at net realizable value while expenses are recognized in the same period as the sale to correspond with the matching principle. When financial statements are prepared, an estimation of the uncollectible amounts is made and an adjusting entry recorded. Thus, the expense, the allowance account, and the accounts receivable are all presented properly according to U.S. [1] Some companies include both accounts on the balance sheet to explain the origin of the reported balance. Others show only the single net figure with additional information provided in the notes to the financial statements. [2] Because the focus of the discussion here is on accounts receivable and their collectability, the recognition of cost of goods sold as well as the possible return of any merchandise will be omitted. Those topics are discussed in detail in later chapters.
badcredit loans
quick loan approval
need loan
1 800 cash now
1 hour loans direct lender
payday loans az
cash loan stores dallas tx
cash loans in clinton tn
quick loans no credit
no credit check payday loans dallas tx
payday loan help texas
cash loan Sitka
fixed rate personal loan
payday loans maryland online
payday loan today
payday loan laws for florida
online cash advance direct lender
fast loan options